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Orange County Choppers, which opened its multi-million dollar headquarters in 2008, is facing foreclosure.

The lender that financed Orange County Choppers' new headquarters in the Town of Newburgh has filed a foreclosure action against the builder of custom motorcycles, alleging that it missed its July mortgage payments.

Orange County Choppers has two mortgages through GE Commercial Finance Business Property Corp., one for $11 million and one for $1.5 million.

The foreclosure action claims that the Choppers missed mortgage payments of approximately $96,400 and $14,000 due on July 1.

The Choppers stopped making mortgage payments in order to put pressure on the lender to modify the terms of the loans, according to Choppers' lawyer Richard Mahon. Mahon said that when the headquarters was built in 2007, it was valued at about $12 million. Because of the economic downturn, the building is now worth between $7 million and $8 million, he estimated.

"This is just a bump in the road," Mahon said. "We believe the parties will reach a resolution and the headquarters will continue in this location."

"We worked very hard to try to come up with a better outcome, but in the end we had to make a business decision based on our agreement, and we did," he said.

The Orange County Industrial Development Agency is also named as a defendant in the action, since it technically owns the property under a payment-in-lieu-of taxes arrangement with Orange County Choppers.

IDA chairman James Petro said he did not know the specifics of the suit.

"You just hate to see anything not go smoothly," he said. "They've been a staple of the community for 10 years, and I hope they can work through their problem."

The IDA is not liable for the back mortgage payments because a clause in the lease-back arrangement indemnifies it against default by the Choppers, said IDA attorney Philip Crotty.

The IDA has a long history of working with the Choppers, in addition to the package of tax breaks that helped the Choppers build the headquarters. In July, the IDA board approved a 10-year PILOT for Choppers Roadhouse, a restaurant to be located next to Choppers headquarters. The board also considered hiring Paul Teutul Sr.'s company to custom-build a motorcycle for the agency on his cable TV show at a cost of $75,000 to $85,000. The board viewed the project as a marketing tool, but abandoned the plan amid criticism over the idea of using taxpayer money for the project.

Now that the foreclosure filing has occurred, Mahon expects that talks will restart. He said it's unlikely the lender would want to seize the property because it was built for a specific use, and the tax breaks now enjoyed wouldn't carry over.

He also said that it would be wrong to assume that Paul Teutul Sr. is broke because of his company's failure to pay.